Wal-Mart Stores Inc. (NYSE: WMT) shares surged when the company announced earnings. The stock has not given back any of that rally during the most heated part of the holiday season. The Walmart success story has legs.
Walmart’s shares are up 43% this year to $99, compared to a 19% improvement in the S&P 500 to 2,400. The price is slightly better than flat since Thanksgiving. Over the same period, shares of arch-rival Amazon.com Inc. (NASDAQ: AMZN) are down slightly to $1,152.
To believe the Walmart story, investors have to be convinced that its e-commerce efforts can finally hold off Amazon and perhaps fight it to a draw. In a typical quarter in the past year, Amazon revenue has risen about 25% year over year. (The number is misleading because of the surge in sales at AWS, its industry-leading cloud services division, makes its e-commerce growth less impressive.) Walmart does not supply enough earnings data to show if its e-commerce has kept pace with Amazon, or will in the near term. However, executives at the company have strongly hinted online sales continue to be robust. And Walmart has bought e-commerce companies to bolster what it sells via Walmart.com.
The second argument for the continued improvement in Walmart’s stock is that it is eating away at the revenue from other large, national brick-and-mortar retailers. This includes J.C. Penney Co. Inc. (NYSE: JCP); Sears Holdings Corp. (NASDAQ: SHLD), which owns the Kmart and Sears brands; and Target Corp. (NYSE: TGT). If the earnings of these companies are a fair indication, Walmart may indeed be gaining revenue at their expense.
Walmart’s store count of 4,700 gives it proximity to most of the U.S. population. By itself, this gives the country’s largest retailer an edge as people rush to shop before the end of the year.
Walmart has enough advantages that its stock price likely will continue rising.